This is a re-post from Sudhir Hasbe's original post with some changes.
Many customers have WSS3.0 farms in house and they want to use these farms with TFS. In TFS 2005 you had to use WSS2.0 on TFS machine and you could not leverage the existing farms in the company. With TFS 2008 you can use an existing WSS3.0 farm. We have received many questions about upgrading the TFS 2005 with WSS2.0 environment to TFS 2008 with an existing Share Point Farm. Following are detailed steps to achieve this:
I hope this is helpful. Please let me know if you have any questions or concerns